Correlation Between Gravity and Penn National

Can any of the company-specific risk be diversified away by investing in both Gravity and Penn National at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gravity and Penn National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gravity Co and Penn National Gaming, you can compare the effects of market volatilities on Gravity and Penn National and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gravity with a short position of Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gravity and Penn National.

Diversification Opportunities for Gravity and Penn National

0.46

Correlation Coefficient

Gravity  Penn National

Very weak diversification

The 3 months correlation between Gravity and Penn is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gravity Co and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming and Gravity is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gravity Co are associated (or correlated) with Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Gravity i.e., Gravity and Penn National go up and down completely randomly.

Pair Corralation between Gravity and Penn National

Given the investment horizon of 90 days Gravity Co is expected to generate 0.49 times more return on investment than Penn National. However, Gravity Co is 2.06 times less risky than Penn National. It trades about 0.14 of its potential returns per unit of risk. Penn National Gaming is currently generating about -0.27 per unit of risk. If you would invest  5,689  in Gravity Co on January 4, 2025 and sell it today you would earn a total of  324.00  from holding Gravity Co or generate 5.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gravity Co  vs.  Penn National Gaming

Gravity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gravity Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gravity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Penn National Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gravity and Penn National

The main advantage of trading using opposite Gravity and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gravity position performs unexpectedly, Penn National can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Penn National will offset losses from the drop in Penn National's long position.

The idea behind Gravity Co and Penn National Gaming pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.